The Peter McCormack Show #055: Shanker Singham – How to Fix the UK Economy

Date: March 4, 2025
Host: Peter McCormack
Guest: Shanker Singham (trade and competition policy expert)

Episode Overview

This episode centers on diagnosing the root causes of the UK’s ongoing economic malaise and exploring what it would take to genuinely revive growth, prosperity, and opportunity for everyday people. Guest Shanker Singham—renowned for his work on competition, trade, and growth—breaks down why the UK is falling behind its peers, the true impact of government decisions over the last 25 years, and the practical reforms needed to restore economic optimism. The discussion is candid, empirical, and at times, deeply skeptical of political will or competence—yet ultimately optimistic about what’s possible.

Key Discussion Points & Insights

1. Why UK Growth Feels Broken (00:00–06:43)

• GDP Per Capita vs. GDP:
  Singham opens with the critical distinction between “headline” GDP growth and GDP per capita, underlining that ordinary people only feel improvement when GDP per capita rises.

  “What you actually feel as a regular person is GDP per capita. That's what you feel in your pocketbook. And that's going down…” (04:40)

• The Dangers of Economic Contraction:
  The psychological toll of stagnation and contraction has left Britain demoralized, yet it’s policy-driven, not inevitable.

  “We don’t have these feelings because it’s just the way of the world. We have these feelings because of what our governments have done to us in the last 25 years. Deliberately. Deliberate choices.” (00:51, 81:46)

• The Power of Compounding (and Neglect):
  Losing even 1% in growth annually leads to radical divergence; the US would have been smaller than Mexico if its historic growth rate had slipped—a lesson for the UK and its current trajectory. (05:24)

2. Policy Failures: Tax, Regulation, and Competition (06:43–14:20)

• High Taxes and Regulation:
  UK policies have incrementally destroyed growth, mainly via over-taxation and the unintended consequences of well-meaning but anti-competitive regulation—especially in the environmental and financial sectors.

  “It’s a lot easier to destroy [wealth] than it is to create… competition is the biggest force we know that actually allows that growth to take place.” (10:29)

• Regulatory Capture:
  Much regulation exists for incumbent interests, not consumers or society, stifling disruptive innovation (including in banking and Bitcoin).

  “A lot of that regulation is in place because large incumbent companies want it there… You see this in banking. You see this in many, many things.” (08:11)

3. Measurement Deceptions: GDP vs. Reality (14:20–18:20)

• GDP vs. GDP Per Capita:
  UK growth headlines can be misleading due to the rapid population rise (immigration) and government spending—including money creation—masking lack of real private sector gains.

  “You can massage a GDP figure…but really the only figure people should care about is per capita.” (17:39)

• Private vs. Public Sector Distinctions:
  True growth must be tracked in private sector activity, not just aggregate numbers. (17:53–18:20)

4. Entrenched Interests, Policy Inertia, and the Growth Commission Blueprint (18:20–31:11)

• Why Obvious Solutions Aren't Enacted:
  McCormack repeatedly asks why politicians don’t simply enact what works. Singham replies that incumbent power—from unions to big business—blocks reform, favoring the status quo even at the country’s expense.

  “What is the barrier to making these what seem obvious decisions?” (23:33)
  “All of these things are driven by different kinds of incumbent status quo powers…” (25:50)

• Labour Market Inflexibility:
  Proposed Labour reforms will further entrench job market rigidity, discouraging small businesses from hiring and undermining growth. (24:02)
• Subsidies and State-Driven Energy Policy:
  Direct subsidies distort markets and reduce wealth. Efforts like Great British Energy or excessive renewable subsidies crowd out competition and ultimately hurt consumers. (28:41)
• Growth Commission Findings:
  • Planning reform alone could contribute one-third of projected gains; current policies outside of planning changes project -8% GDP per capita over twenty years. (14:18)
  • Even a 10% competition increase can add 5.5% to GDP per capita—a huge difference over time. (11:49)

5. Competition, Regulation, and International Experience (31:11–43:57)

• Incumbency and Regulation—Case Study in Mexico:
  Personal anecdotes (AT&T vs. Telmex) illustrate how incumbent firms manipulate the system, regardless of country.

  “Firms will do what firms will do in the regulatory environment they find themselves in. It’s not their fault… What we have to do is change the regulatory environment.” (33:43)

• Evaluating Regulation:
  Advocates a new framework: every regulation should be explicitly assessed for its effect on competition, trade, and property rights. (37:01)
• Harmonisation vs. Competition:
  Forced regulatory harmonization (as in the EU) often empowers big business and dulls dynamism; UK should instead embrace regulatory competition (e.g., Irish low corporation tax). (39:52)
• Mutual Recognition:
  Instead of copy-pasting EU or other regulatory environments, countries should recognize differing standards that achieve the same objectives, supporting innovation and competition. (41:17)

6. Brexit, Regulatory Independence, and Missed Opportunities (46:15–62:09)

• Brexit Frustrations:
  • The UK has not yet seized opportunities for regulatory reform; it ported all EU law into domestic law and even made some areas less competitive post-Brexit. (60:10)
  • The greatest risk is “locking yourself back in to the same regulatory environment you just left”—with none of the upsides. (62:09)
• Politics vs. Economics:
  Political expediency trumps sound economics time and again, and policy-making is rarely guided by what would actually drive meaningful growth for citizens.

  “The problem that gets in the way of good economics is bad politics.” (63:41)

7. Fixing the Future: Evidence-Based Policy and External Pressures (49:15–67:55)

• The “Growth Commission” Models:
  Thirty years of modeling confirm that domestic reforms (especially boosting competition) are three to four times more powerful than trade liberalization alone. (51:10)
• Politicians Lack Will—Not Data:
  Experts repeatedly advise governments, but ideological and incumbent interests ensure little changes. (65:32)
• External Leverage:
  Sometimes, countries need outside incentives (as Mexico used NAFTA/US) to finally implement reforms. The UK might similarly need “external agents” like a US trade agreement to force pro-growth changes. (66:28)

8. Trump, Tariffs, and Global Trade Policy (67:55–78:49)

• Trump’s Tariff Doctrine: Four Pillars (68:24–73:03):
  1. Threat as Leverage (e.g., to solve non-trade issues)
  2. Revenue Generation: Small tariffs for budget purposes—a unique power only the US can wield
  3. Reciprocal Tariffs: Punishing distortionary, anti-competitive policies abroad
  4. Property Rights Protection: Enforcing IP via trade penalties
• The Real Impact:
  If the world measures up to “level playing field” standards—reciprocating openness and dismantling anti-competitive barriers—everyone benefits. Otherwise, arbitrary tariffs could destroy wealth at historic scales. (73:06)
• Re-evaluating Free Trade:
  The post-Cold War assumption that trade liberalisation would automatically yield democracy and prosperity was wrong—liberalisation must be paired with internal reforms in property rights and competition. (73:06)
• Advice for Engaging with Trump:
  Focus on the problem he’s trying to solve; present answers that resonate with his underlying objectives, not your own. Analytical—not emotional—engagement is essential. (76:32)

9. Freeports & Special Economic Zones (78:49–83:46)

• The UK Should Expand Freeports—But Get the Model Right:
  • Best zones combine tax breaks with sweeping regulatory reform.
  • Microcosms for what should be national changes; showcase what’s possible when incumbency is absent.

  “I would test freeport rules and regulations: is there something in there that I would want in the whole country?... It’s an alternative delivery mechanism for reform.” (79:52)

• Global Examples:
  Singapore, Dubai, and others used such zones to leapfrog economic stagnation and inspire optimism—a potential model for Britain’s future.

  “When you get GDP per capita and when you get this kind of growth, you change people. They become optimistic, they become hopeful… It doesn't have to be this way. And there are lots of examples all over the world where it isn't that way.” (81:34)

Notable Quotes & Memorable Moments

On Stagnation and Growth

• “The danger of contraction… is it just destroys the will of people to sort of get through the day. And I think the British people are kind of at that place. And it doesn’t have to be this way.”
  • Shanker Singham (00:00, 81:34)

On GDP Per Capita

• “Every time you’re told about GDP, ask about GDP per capita.”
  • Peter McCormack (17:39)

On Regulatory Reform

• “It's a lot easier to destroy wealth than it is to create. And competition is the biggest force we know that actually allows that growth to take place.”
  • Shanker Singham (10:29)

On Incumbency and Regulatory Capture

• “A lot of that regulation is in place because large incumbent companies want it there… They want it there so that they can stop new entrants from entering the market and competing.”
  • Shanker Singham (08:11)

On Political Barriers

• “The problem that gets in the way of good economics is bad politics.”
  • Peter McCormack (63:41)

On the Power of Anger and Democracy

• “The only thing that offsets incumbent power and status quo is the people getting angry, frankly. And… what surprises me is that the British people are not more angry that their quality of life has been substantially eroded through the decisions of their own governments.”
  • Shanker Singham (53:17)

On Freeports and National Mood

• “When you get GDP per capita and this kind of growth, you change people. They become optimistic…”
  • Shanker Singham (81:34)

Key Timestamps

• Economic Malaise and Policy Drivers: 00:00–06:43
• Tax, Regulation, and Effects: 06:43–14:20
• GDP vs. GDP Per Capita: 14:20–18:20
• Regulatory Capture and Banking Example: 18:20–23:04
• Competition, Planning Reform, and Growth Modelling: 11:49–14:18, 24:02–31:11
• Regulatory Harmonisation and Irish Tax Story: 39:12–43:57
• Brexit, Regulations, and Power: 46:15–62:09
• External Forces and Reforms (NAFTA/US/Trump): 65:32–67:55
• Trump's Tariff Doctrine: 67:55–73:06
• Engaging with Trump and Mindset: 76:32–78:49
• Freeports and Special Economic Zones: 78:49–83:46

Final Thoughts & Tone

Shanker Singham’s tone blends frustration at political inertia with empirical optimism about what is technically achievable—if only incumbent power can be checked and the public demands real change. McCormack’s questions cut to the heart of everyday business reality, translating policy abstractions back to street-level impact. The conversation is unsparing in its critique of UK policy-making, yet offers a compelling roadmap for meaningful and measurable economic revival.

“We need to get a bit more angry, a bit more vocal.”
– Peter McCormack (83:59)

For listeners seeking substance over soundbites, this episode offers a masterclass in real-world economics, regulatory reform, and the gritty dynamics that separate prosperity from stagnation.